By Ben Hirschler
LONDON (Reuters) - AstraZeneca (L:AZN) revenue fell by a smaller-than-expected 7 percent in the second quarter, as income from selling rights to medicines offset generic competition to older drugs and a strong dollar.
The drugmaker increased its revenue forecast for the year and said it now expected a low single-digit percentage decline, against mid single-digit previously, while core earnings are still expected to increase at a low single-digit rate.
The decision to hold the earnings outlook despite a better revenue picture reflects accelerated investment in research and development.
Chief Executive Pascal Soriot, who fended off a $118 billion (75.6 billion pounds) takeover attempt by Pfizer (N:PFE) last year, is banking on a promising pipeline of new drugs - particularly in cancer - to revive the company's sales from 2017.
The company submitted two new oncology drugs for approval in the quarter - AZD9291 for lung and cediranib for ovarian cancer. AZD9291, in particular, is expected to be a major seller, with AstraZeneca seeing potential annual sales of around $3 billion.
The company's established business is under pressure from a slew of patient expiries but heartburn pill Nexium, which now faces generic competition in the United States, held up better than anticipated and also did well in Japan and emerging markets.
Sales of cholesterol fighter Crestor and diabetes products, which have disappointed in the past, were also stronger than expected, while revenue from new heart drug Brilinta rose 23 percent to $144 million.
"We made good progress in the period, delivering a robust underlying business performance," said Soriot.
Investors were cheered by the fact the earnings beat was due to solid product sales as well as licensing deals, and the shares had risen 2.2 percent by 0745 GMT.
Quarterly sales totalled $6.3 billion, while core earnings per share, which exclude certain items, fell 8 percent to $1.21.
Industry analysts had on average forecast sales of $6.0 billion and earnings of $1.05 cents a share, according to Thomson Reuters. A one-off tax benefit contributed to the earnings beat.
Revenue from "externalisation", or the sale of rights to certain drugs, amounted to $471 million in three months to June 30, with the largest chunk coming from a $450 million deal with Celgene (O:CELG). Income from such deals is expected to tail off in the second half of the year.